Court Rules For State In School Employee Retiree Health Care Case

Michigan public school employees are not entitled to be paid interest in the 10-year-old lawsuit involving a Granholm-era law earmarking 3 percent of public school employee wages to pay for public school retiree health care, the Court of Appeals has ruled.

In December 2017, the Supreme Court ruled in favor of Michigan teachers and public school workers, holding that PA 75 of 2010 violated both the U.S. and Michigan Constitution by impairing contracts and ordering the refund of more than $550 million to those employees (AFT v. Public School Employee Retirement System, SC Docket No. 154117-9). In 2018, those monies, which had been held in escrow for years, were refunded.

But later in 2018, the school employees went back to court and demanded they be paid interest, saying the state’s placement of the escrow funds into an interest-bearing account failed to satisfy a claim for judgment interest provided for in the Court of Claims Act. The state contended that the plaintiffs had waived any claim to judgment interest when the court granted their preliminary injunction request that ordered funds be placed in an interest-bearing escrow account.

The Court of Claims sided with the employees on the question of awarding interest.

Earlier this year, the administration of Governor Gretchen Whitmer said the request for interest could cost the state $40 million.

In a ruling dated Thursday and released this morning, the Court of Appeals in reversing the Court of Claims ruled 3-0 that the Supreme Court’s order that the funds originally taken from the plaintiffs be refunded with interest was satisfied through the interest accrued in the interest-bearing account. “Had this court wished to order the payment of judgment interest, it would have done so,” the Court of Appeals wrote.